Replacement Analysi

Replacement Analysi Student Help 1.4. Replacement Analysis (5 points)
Although the Chen Company’s milling machine is old, it is still in relatively good working order and would last for another 10 years. It is inefficient compared to modern standards, though, and so the company is considering replacing it. The new milling machine, at a cost of $39,000 delivered and installed, would also last for 10 years and would produce after-tax cash flows (labor savings and depreciation tax savings) of $9,300 per year. It would have zero salvage value at the end of its life. The firm’s WACC is 12%, and its marginal tax rate is 35%.

Don’t use plagiarized sources. Get Your Custom Essay on
Replacement Analysi
Just from $9/Page

Order Essay

What is the NPV?
The NPV of project is
What is IRR?
The IRR of project is
Should Chen buy the new machine? Please enter your answer as buy or not-buy.
Chen should the machine.
Round your answer to two decimal places. For example, if your answer is $345.667 enter as 345.67 and if your answer is .05718 or 5.718% enter as 5.72 in the answer box provided.

The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer’s base price is $1,110,000, and it would cost another $24,500 to install it. The machine falls into the MACRS 3-year class (the applicable MACRS depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%), and it would be sold after 3 years for $590,000. The machine would require an increase in net working capital (inventory) of $8,500. The sprayer would not change revenues, but it is expected to save the firm $473,000 per year in before-tax operating costs, mainly labor. Campbell’s marginal tax rate is 37%.
a. What is the Year 0 net cash flow?
The Year 0 net cash flow is $
b. What are the net operating cash flows in Years 1, 2, and 3?
Year 1 cash flow is $
Year 1 cash flow is $
Year 1 cash flow is $
c. What is the additional Year-3 cash flow (i.e, the after-tax salvage and the return of working capital – also called terminal value)?
The additional Year 3 cash flow is $
d. If the project’s cost of capital is 16.5%, what is the NPV of the project? IRR?
The NPV is $ and the IRR is %.
e. Should the machine be purchased? Please enter your answer as either buy or don’t buy.
the machine.

Continue to order
Get a quote

Post navigation
Foundation of accounting procedures and processes.Expanding international operations.

Place your order
(550 words)

Approximate price: $22

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
The price is based on these factors:
Academic level
Number of pages
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more
Open chat
You can contact our live agent via WhatsApp! Via + 1 3234125597

Feel free to ask questions, clarifications, or discounts available when placing an order.